“[Last week you wrote…] ‘There are other creative ways to avoid taxes. Under current tax laws, you can move into your rental property for 2 years, converting it into your personal residence, and then sell it and likely pay very little taxes.’
I think the government has made a modification to this. I’m not sure of the specifics, but I believe if you move into a property you held for investment, you now need to live in it for five years before you can sell it and claim the homeowner’s 250K/500K exemption. Just want to keep your newsletter accurate. Hope all is well, D.S.”
***ANSWER:
Thanks for the email. I appreciate you taking the time to read my newsletter and to email me about errors or omissions. I’ve been known to make more than my share, for sure.
Regarding that modification…
President Bush signed H.R. 4520 into law on October 22, 2004. It says that if you exchange into a rental property, you have to own it for five years. You still only need live in it for 2 years.
In case you enjoy reading tax code, here’s a relevant excerpt I found on www.IRS.gov:
“Section 121(d), as amended by § 840 of the American Jobs Creation Act of 2004, Pub. L. 108-357, provides that, if a taxpayer acquired property in an exchange to which § 1031 applied, the § 121 exclusion will not apply if the sale or exchange of the property occurs during the 5-year period beginning on the date of the acquisition of the property.”
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